Weird Schedule K-1 Question

[Ephesians3-14]

I have a client who in prior years received a K-1 from a partnership in which is was listed as a general member. Accordingly, there was always self-employment tax reported on the K-1. So far, so good.

Now, this year (2021), he sent me the same K-1 as he always has in the past but now it shows that his revocable trust owns the partnership interest (and not him as an individual). Because trusts are not subject to self-employment tax, there is no amount reported on line 14A (Self-Employment Tax).

Since his trust is a revocable (grantor) trust, no Form 1041 was filed and I am picking up the income on my client's 1040 I am also reporting self-employment tax on Sched SE because I'm pretty sure he would still owe S/E tax on that income. Did I handle that correctly?

Wonder if I also need to file a trust return in this case?

Thanks for any feedback.

[Just-Lisa-Now- · Accepted solution]

Income for a revocable living trust works the same as an individual and gets reported on the 1040.

[BobKamman]

"Pretty sure" is good enough for your client to fork over $20,000 or so to IRS?  On the other hand, if he's a retired federal employee looking to collect enough quarters of coverage, he might be upset if you told him not to pay it.  Unfortunately, this is a "facts and circumstances" question.  Your hair might turn gray from worrying about such gray areas.  There's an interesting discussion here:

https://lawprofessors.typepad.com/agriculturallaw/2017/05/self-employment-tax-on-farming-activity-of...

I wonder what the 1065 instructions say about this.  My guess is that they are wishy-washy, because that's usually the case with SE tax issues.